Gold Prices Gain as Fed, Cyprus Offer Support (Update 1)

Updated from 1:08 p.m. EDT with settlement prices

NEW YORK ( TheStreet) -- Gold prices lifted higher Thursday as a mixture of Federal Reserve support and uncertainty in Cyprus was lending strong technical support to the yellow metal.

Gold for April delivery rose $6.30 to settle at $1,613.80 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,616.50 and as low as $1,603.60 an ounce, while the spot price was adding $8.60, according to Kitco's gold index.

"The overnight evaluation of the FOMC (Federal Open Market Committee) statement is being treated a little more bullishly than it was than the first knee-jerk analysis," said James Steel, chief commodities analyst at HSBC Bank USA. "You still can't discount the safe-haven impact from Cyprus -- it hasn't gone away yet."

The policy-making wing of the Fed said on Wednesday the U.S. economy had returned to moderate economic growth after a slight lag in the 2013 fourth quarter, and said that the labor market was showing signs of improvement.

The FOMC also released its forecasts, which showed a slight downward revision in real GDP growth to 2.3% to 2.8% in 2013, but it also highlighted the committee's projection that the unemployment rate this year would tick even lower than it had previously expected to 7.3% to 7.5%.

"It's somewhat interesting that they've reduced their growth profile, somewhat, but that they've reduced the unemployment rate as well," Bob Brusca, chief economist of Fact & Opinion Economics, said in an interview. "You have to judge that as them bringing the numbers in line with reality -- there was that sharper-than-expected drop in unemployment."

Gold's continued upward climb on Thursday following the Fed's announcement and Chairman Ben Bernanke's press conference has suggested that markets believe the central bank won't scale back its open-ended monthly purchases of mortgage-backed securities and longer-term Treasuries. Gold investors view quantitative easing as an inflationary concern, which makes the yellow metal a hedge against price increases.

Silver prices for May delivery climbed 40 cents to close at $29.21 an ounce, while the U.S. dollar index was slipping 0.13% to $82.76.

Gold was ignoring downward pressure from the greenback, which was incurring most of its dip from a strengthening Japanese yen. The Japanese currency was surging to ¥94.69 from the prior day's close at ¥96.01. Countering the move in the yen was the euro currency's continued weakening against the U.S. dollar. The euro was sliding to $1.2906 from the previous night's settlement at $1.2936.

Gold and the U.S. dollar have moved in tandem since the trading week began as uncertainties over a possible Cyprus bailout plan, including whether the small island nation-state would impose a haircut on bank deposits, made gold an appealing safe-haven play and put the euro currency on rocky footing.

The Cypriot parliament voted earlier this week against the tax on deposits, but banks there remained closed as the European Central Bank was withholding funding for the near-insolvent banking sector.

"The uncertainty surrounding Cyprus -- it's bailout situation, we've got Russia and the IMF seemingly wrangling over aid to Cyprus -- and all that's causing uncertainty in the marketplace, which is benefiting the safe-haven gold market," Jim Wyckoff, senior metals analyst at Kitco.com, said in an interview.

Wyckoff said fresh speculative interest has entered the gold market this week on strong technical support for the precious metal. Gold settled over $1,600 an ounce on Monday, following the Cyprus news, which technical analysts had noted as a key resistance level. The move above that level suggested positive upward momentum in the market.

Gold mining stocks were mostly higher on Thursday. Shares of Yamana Gold ( AUY) were rising 3% and shares of Randgold Resources ( GOLD) were up 3.2%.

Among volume leaders, Barrick Gold ( ABX) was increasing 2.9%.

Gold ETF SPDR Gold Trust ( GLD) was tacking on 0.62%, while iShares Gold Trust ( IAU) was gaining 0.55%.

-- Written by Joe Deaux in New York.

>Contact by Email.

More from Gold

Market Bears Have Devoured Gold Prices

Market Bears Have Devoured Gold Prices

Gold to Skyrocket as Italian Rebellion Unfolds

Gold to Skyrocket as Italian Rebellion Unfolds

2010-Style Crisis Approaches: Prepare For Flight To Safety

2010-Style Crisis Approaches: Prepare For Flight To Safety

Gold Prices Look 'Rich' at Current Levels - Here's What Could Change That

Gold Prices Look 'Rich' at Current Levels - Here's What Could Change That

Watch This If You're Wondering How Much Gold to Have and When to Sell

Watch This If You're Wondering How Much Gold to Have and When to Sell